Is it more affordable to buy or rent a home in Chicago?

The relative affordability of housing can vary across the country, from state to state, county to county, and city to city. If you’re looking for housing, one of the questions you may likely be asking yourself is whether it is more affordable to rent or buy.

ATTOM Data Solutions did some research, and in its 2017 Rental Affordability Report found that right now buying a home is more affordable than renting in 66 percent of U.S. housing markets.

Specifically, the report found that the mortgage, property taxes and insurance on a median-priced home is more affordable than the fair market rent on a three-bedroom property in 354 of the 540 counties that were analyzed in the report.

Whether you rent or buy in your chosen market, and despite the comparative affordability, prices are still rising, according to ATTOM. The report notes that rents and home prices overall are rising faster than wages in a majority of the markets. In the 540 counties analyzed, fair market rents for three bedroom properties are rising 4.2 percent over last year, and median home prices are up 5.7 percent. But, since last year, average wages were up only 2.2 percent.

So, back to the question of whether it is more affordable for you to rent or buy. You are interested in homes for sale in Chicago in today’s market,  here is a list of homes of available.

SmartAsset provides a comprehensive Rent vs Buy calculator. You provide the location, as well as intel on monthly rent, target home price, down payment, marital status, annual income, proposed length of loan and a few more specific details, and the calculator will show you a cost comparison between renting and buying, and a short brief on its findings. For Chicago, a comparison of the monthly rent of $1,500 and a target home price of $500,000 with 20 percent down by a single person with an annual income of $55,000, plus a few other factors, the calculator determined that the conditions for renting were more favorable versus buying over the length of a 30-year loan.

You also want to aid your research by measuring the price-to-rent ratio in your chosen markets. According to SmartAsset, a price-to-rent ratio measures the affordability of renting and buying in a particular housing market, and compares home prices to annual rental rates.

Formula for calculating price-to-rent ratio: Home value ÷ (12 x $ monthly rental value). Example: $500,000 ÷ (12 x $2,000) = 20.83.

The conventional wisdom is that a lower price-to-rent ratio is more favorable for homebuyers, and a higher price-to-rent ratio is more favorable for renters. For the Chicago market, SmartAsset found that the price-to-rent ratio is 21.6 (using a home value of $250,000 and a rental factor of $1,000/month. So, it would appear in this case that the Chicago market is more favorable to homebuyers.

Of course, there are always variable outside factors that can affect or manipulate the outcomes of your research with either the Rent vs Buy Calculator or the formulations for price-to-rent ratio. But these are usually subjective factors you can’t easily quantify, like personal preferences for certain neighborhoods, or local quality-of-life markers.